May City avoid, based on policymaking powers, collectively bargained MOU arbitration regarding grievance over mandatory employee furloughs?

Posted in: Arbitration, Employment Law by Steven Vartabedian on

In City of Los Angeles v. Superior Court ( filed 6/21/13) S192828, City, after declaring a fiscal emergency, placed civilian employees on a mandatory unpaid furlough requiring one less 8-hour work day during each 80-hour work period. Employees filed grievances. Wage and hour provisions of the collectively bargained MOU provided that employees would be compensated for 40 hours per week based on 52 weeks per year. Contractually, MOU grievances were to be submitted to arbitration. City refused to arbitrate the grievances because arbitration here would constitute an unlawful delegation to the arbitrator of discretionary policymaking powers.

Employees through their union petitioned the Superior Court to compel arbitration. The court granted the petition. City then petitioned the Court of Appeal, which agreed with City that it could not be compelled to arbitrate. In its 4-3 majority opinion, the California Supreme Court reversed the Court of Appeal, finding arbitration of this dispute does not constitute an unlawful delegation of discretionary authority, and City is contractually obligated to arbitrate.

The City argued its right to unilaterally impose furloughs is found in the MOU provision that City could “relieve City employees from duty because of . . . lack of funds;” that a grievance can only be brought as to the practical consequence of a furlough decision. The Union countered that the quoted provision authorized layoffs, not furloughs and does not override the MOUs’ wage and workweek provisions. While saying the contractual language is not free of ambiguities, the Supreme Court majority agreed with the Union. It found that, by ratifying the MOU, City made discretionary choices regarding salaries and the overall budget; what was being determined in these grievances is a matter of contractual interpretation typically vested in the courts, or in this case an arbitratorial tribunal; the arbitrator would not be exercising any discretionary policymaking authority as complained of by City.

The dissent saw the matter differently: only a specific contractual provision could restrict City’s exercise of its prerogative, and no such provision was found here. The Union was free to negotiate for a narrower management rights clause, or it could have negotiated for specific protection against furloughs. It did neither. The three dissenting justices saw City’s decision to impose furloughs as a reserved management right, beyond the scope of arbitration. And they saw nothing nefarious in that City was not seeking to insulate its decision from oversight that would come with true judicial review; instead, here the parties will get a binding decision from an unelected, “second-guessing” arbitrator.

I find it amusing that the roles of the parties regarding arbitrability seem reversed here. Usually business and management want arbitration, and consumers and employees fight the imposition of arbitration. As someone who serves as an arbitrator from time to time, I am somewhat disconcerted that after the parties make all of their pertinent arguments, a typical parting shot of those opposed to arbitration (in a particular situation) is that justice somehow will not be served by an arbitrator’s binding decision. This concern seems a bit fickle to me.

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